Antitrust Authority ends SuperPharm mall monopoly

The exclusivity enjoyed by 120 SuperPharm branches in Israeli commercial centers will end.

Israeli Antitrust Authority director general Advocate Michal Halperin and the SuperPharm Israel chain of pharmacies have agreed on the cancelation of the chain's exclusive right to place branches in shopping malls and centers. 120 exclusive arrangements will be eliminated, and the malls and centers will be opened to competition.

The new arrangement is anchored in an order signed by Halperin and SuperPharm, following an Antitrust Authority probe of restraint of trade by SuperPharm. The chain has 220 branches.

A year ago, Maccabi Health Services complained to the Antitrust Authority that SuperPharm's exclusivity was preventing Maccabi from opening a pharmacy in a shopping center next to its health clinic. The Antitrust Authority conducted an investigation into whether the exclusivity arrangement violated the Restrictive Trade Practices Law.

Sources inform "Globes" that this probe has been completed, and that Halperin was on the verge of a final decision on imposing monetary sanctions against the chain for administrative violations harmful to competition. Just before the probe ended, however, the SuperPharm chain notified Halperin of its wish to reach an agreement, thereby avoiding the sanctions. The agreement will make it easier for competitors to enter, and encourage competition between the pharmacy chains and pharmacies.

The exclusivity arrangements affected by the order are leasing arrangements that prevented the owners of a shopping mall or center from leasing stores to a business that competes with SuperPharm, thereby restricting competition in the vicinity of SuperPharm branches. According to the consensual order, SuperPharm will cancel the exclusivity arrangements at its 120 branches within six months at most, and at an additional 40 branches within four years. In addition, SuperPharm's exclusivity arrangements will henceforth be limited to three years after a branch is opened for both new and existing branches. Halperin agreed to make an exception for another 18 branches. She also agreed to limited three-year exclusivity for new branches in order to enable the chain to make back its investment on the new branches.

This is not the first time that the Antitrust Authority has examined the exclusivity arrangements of chains and imposed restrictions on them. In 2005, the Antitrust Authority ruled that the land exclusivity arrangement agreed on by Israel Discount Bank (TASE: DSCT) and the Harel mall in Mevasseret Zion was an agreement in restraint of trade, and therefore forbidden. Exclusive land arrangements have since become less common, but SuperPharm nevertheless continued to contract long-term exclusivity arrangements. Over the years, SuperPharm even instituted legal proceedings in order to enforce exclusive land conditions.

The SuperPharm chain stated, "We welcome the Antitrust Authority's fair ruling on SuperPharm's exclusivity in shopping malls. We are confident and expect that the Antitrust Authority will now apply equal rules to all exclusivity arrangements in Israel and to all chains in all sectors."